Retirement Income for Life – Review and Giveaway

“Drawing down one’s savings in retirement is something very few retirees do well, even with the help of professional advisors.” – Fred Vettese, Retirement Income for Life.

If you want to learn about a few ways you can earn retirement income for life – this book will help.

In golf, the finishing holes are just as important as the front nine to score well. The same could be said for asset accumulation years and asset drawdown or decumulation years when it comes to money management.

Smart decumulation strategies are difficult to employ because retirees have, for the most part, conflicting goals. Retirees ideally want to have enough money to last a lifetime but at the same time, they want to enjoy the wealth they’ve worked so hard for.

This means asset decumulation, in comparison to asset accumulation, is the easier of the two.

How can you make your money last? What strategies should you consider to make your retirement income last for a lifetime?

Before we get to the giveaway, like other giveaways on this site, here are my favourite takeaways from Retirement Income for Life (Getting More Without Saving More).

Vettese on retirement categories and strategies in general:

“Spending in retirement falls into three categories or “buckets”: regular spending, rainy day spending and bequests.” Vettese suggests you have income and cash set aside for all three, although the latter (leaving a legacy or inheritance) is far more discretionary.

“A good decumulation strategy maximizes the portion of your income that is stable and predictable. This is a sure-fire way of allaying your financial anxiety after retirement.”

On rainy day spending:

“Supply shocks” will occur in retirement. Whether that comes in the form of major home repairs, dental or health expenses, a family emergency or other circumstances – don’t pretend it won’t happen to you. Plan for these shocks before and during retirement with a rainy day fund. How much is enough? “Hold back about 3 to 5 percent of your retirement income each year…”. “Keep it in a separate account to be used exclusively for rainy day spending.” That equates to $30,000 to $50,000 for a $1 million portfolio.

On investment risk:

“The inescapable conclusion is that you have to invest in stocks if you want a decent return over the long run. There is no guarantee you will get it, but your odds are better than with any other asset class.”

On what not to do, including how not to drawdown your portfolio:

Vettese does not recommend any flat percentage withdrawal – such as 4% or 5% per year. Why? “The real problem with a flat percentage withdrawal is that the income it produces does not reflect your actual needs.”

Vettese does not recommend withdrawing only the interest. Why? Unless you intend to leave a modest to large bequest, in some years investors will have much more income or capital than they need but in some lean years, potentially less. “…there are better decumulation strategies out there.”

Vettese tends to favour withdrawing income equal to the target you need – marrying income needs but also reducing your assets over time in a meaningful and predictable way.

On ways to optimize decumulation:

Vettese recommends investors consider one, two or more of the following:

Invest in passively managed funds to lower your investment costs and fees over time – keeping more of money working for you (versus in the hands of advisors of financial companies).

Use some (not all), maybe between 25-50% or so of your RRIF assets to purchase a non-indexed annuity.

Make adjustments to your spending habits. In “good times” when the market is hot (like 2017 was), consider spending more. In bad times, when the market declines for a couple of years or remains flat, consider spending less.

Consider the “nuclear” option of using a reverse mortgage, later in life.

Summary

Building a massive surplus of money for retirement is absolutely better than running out of money in your old age, but neither situation is ideal. By keeping your investment costs as low as possible for as long as possible, starting government benefits later in life, using some of your assets to purchase an annuity in your 60s or 70s, along with other options – Fred Vettese in Retirement Income for Life shows Canadians they need not worry about having millions of dollars saved for a comfortable retirement.

Canadians can have a very comfortable retirement if they plan well. That planning includes building a modest portfolio before retirement, getting out of debt (including no mortgage) at the time of retirement, and ensuring to the extent possible – they maximize contributions to tax-sheltered accounts such as TFSAs and RRSPs to generate future retirement income.

Enter the giveaway below by using a few methods or all of them. Let me know why you want Fred Vettese’s Retirement Income for Life in a comment or tweet. Tell a friend to subscribe to my site. Send me some Twitter machine love. I’ll raffle off the book to one lucky reader in a few weeks.

Mark Seed is the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $600,000 now - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

I would assume he is averaging that out over the life of the withdrawals. If you withdraw $1 million over several years (decades), 3-5% of each withdrawal would add up to something equivalent of your total portfolio value.

Fred writes decent stuff. I like that he mentions selling assets in addition to withdrawing interest. This is a major cause of anxiety for people when they look at retirement planning — they focus on the huge amount of money they will need to replace their income (via interest/dividends etc), yet completely ignore the fact that they can spend the capital as well. When you look at the whole picture, instead of just half, retirement saving and planning isn’t that daunting or scary.

I’d like to add a highly controversial strategy for retirement income — parental life insurance. If you are nearing the age of retirement and still have living parents, consider taking out a life insurance policy on them. Two things: i) close attention to premium costs is a must. It might be pricey upfront but the pay-off can be valuable; and ii) it’s a touchy subject, I suspect, with a lot of people. You will need consent from the parental unit(s) to do this. However, if everyone involved is pragmatic and approaches the matter in a non-emotional way (as one should with money matters), it can be a great benefit.

His thinking seems to be along the same lines mine, so expect that makes it easier to like reading him.

Of the 5 points above:
1. yes, low costs are a priority for us
2. seriously considering CPP options and delaying to at least 65 or even further is likely
3. an annuity is a strong possibility in another 20 years or so
4. flexible spending is distinctly part of our plan
5. reverse mortgage might be something worth considering for us later in life, but haven’t at this point investigated it

I get having a “rainy day fund” but for us this is just part of our overall asset allocation and sequence of return mitigation efforts

Great way to plug – the book! But, Really? Not at my library? and for those hoping to win? Go invest in yourself and buy the book and while your at it speed another $300 and buy a few more books. No-one should be investing their hard earn money without knowledge! If not – your gambling. So many lazy people out there.

I read or looked at most of his first book: The Real Retirement “You could be better off than you think” and “how to make it happen”
After noting the following statements from the book, and if I took the time to read it in total, I’d probably come away depressed. It didn’t give me any sense that security or a feeling that I could be better off and how to make it happen.
I doubt his new book would be much better!
His Points:
– Retire Later
– Income:
a. OAS
b. CPP
c. DB Pensions, RRSP, TFSA & others
d. Assets, residence, other property, Investments (stocks & bonds)
d. “may be the true source of retirement security for many middle to high income workers, especially if they have not been saving through Pillar 3 vehicles.
– Healthcare cost becoming more important: “The per capita cost for those aged 85 and over is more than 12 times as much as for people between ages one and 49.”
“We can expect that government will force Canadians to assume more responsibility
for certain healthcare costs”
– “Capital Markets in the future will be less helpful in building wealth”
– “a potential average annual return on retirement savings of just 5 to 6 per cent over the next 25 years”
– “In 20 years’ time the economy will run better if we retire around age 66 to 67.. instead of 62”
– “Imagine trying to save 36% of pay every year to reach 70% target (of current income) and retire at age 60”
– “So retirement is expensive and getting more expensive”
– “If we wish to continue retiring at 62, we need to set aside and exorbitant amount of pay to generate a seemingly modest retirement income of 50% of final pay.”
– “Part-Time work will become the Norm of Older Workers”
– “Stock markets have been extremely volatile over the short term, but they remain consistently the best over longer periods.
– “The annual average overall periods, incidentally, was 6.9% (low 3.3% high 11%)
– “We freely admit that investing 70% in equities would be regarded as risky given the skittishness of investors worldwide”
– “If you have less than $500,000 you will probably invest in mutual funds or ETF’s”
– “People who focus their attention too much on planning for their retirement risk missing too much of their life before retirement”

Still relatively early in my working life, but I’ve been very focused on saving for retirement for a number of years already. Always interested in learning something new, so this would be a great book to win to keep planning for life after work.

I just retired a year ago and had to readjust from the accumulation years to the spending years. It was more difficult than I thought it would be. There are not a lot of books that focus on this transition. I would like to win the draw and look forward to learning more about my new circumstances. Love your blog posts? Keep up the good work. Sorry I dont do twitter, but have referred others to your blog in the past.

I am one year away from retiring and I’m trying to read all I can about the de-accumulation phase, since most of the books I’ve read so far are more focused on accumulation. I’d like to read this book to make sure that I’ve got all my bases covered and I don’t make any significant mistakes as I transition out of the workforce.

We are in the process of drawing down the money in our RRSPs (and retiring) and I’m always looking for useful information. If I don’t win, I will definitely look for this at the library. Thanks for telling us about it. Sarah

Vettese’s previous books inspired us to spend a bit more of our retirement money. I found the writing encourages practical adjustments to thinking about assets and also to spending habits. Most of us learned to save money and not spend it.

I’m interested because right now my sister and I are starting to help our 82 year old mother manage her income. We are thinking about trying to decide how much of her RIFF she should be withdrawing annually. She currently takes out the minimum, but my sister and I think we should be increasing the amount so that that money is being taxed via my mother’s income rather than taking a big hit when she dies on the remaining balance. Not sure if this is related, but it seems to me that it’s decumulation from a slightly different perspective.

I don’t know the details and I can’t offer advice anyhow but reducing that tax liability that is the RRSP/RRIF and moving assets as much as possible to the TFSA is ideal. It’s absolutely related to decumulation. You want to die (bad thought) by having “enough” to enjoy life with but at the same time there is little value in dying with “too much” since you can’t take it with you and there are tax implications with estate planning. Just my $0.02!

Why do I want this book? I’m getting very close to quitting my job of the last 13 years and going into (semi)retirement. I’ve done a lot of reading and formal study on the subject but although Fred Vettese is well-known in this area, I haven’t read any of his books yet.

LOL. if you do not win – then what? Will you buy the book? If you need a free book to help you – then your in need of more than just one book. The best investment I have ever made – was in myself – and – I hate reading! But – I made myself read – and – read I did! After 100 plus books – I feel more knowledgeable about how markets work and what is what. I tune out all the so called experts and noise and trust myself. You could to – If only you do the same. But most people won’t – cause most are looking for the easy way and others to blame (for their own stupidity).

Lloyd. My financial path is not for everyone. Quite frankly – I am not sure if anyone could handle the risks I was able to take (perhaps SST). In any event – I have seen so many people (like you) complain about one thing or another. It’s a blog – get over it -not everyone is going to write stuff you like. But the point was: “Reading” and buying books is helpful! Do you have anything good to contribute?

Hi, I might not need the book… I have been reading your blog 🙂
Kudos for that!!!

One thing that bothers me is whether I am going to find enough meaningful activities when I leave the rat race. My target is August 2020, at 52, with modest lifestyle. I know it is rather subjective and personal topic, and subject of other type of blogs, but still very important.

I’m into my 5th of retirement and still question if I’m doing it correctly. I’m always reading others points of view to either question what I’m doing or look at alternative ways of succeeding in this journey. I’ll probably order the book.

I just heard about your website and this is the first article I read. It’s time I start focusing on my “golf finishing holes.” The information in this book interests me and I would like to know more. Thanks.

I am very interested in expanding my knowledge base and feel that Fred Vettese seems to have a slightly unconventional take on the decumulation phase of a person’s life. I am a fee-for-service Financial Planner and find that many brokers and investment advisors for the clients I work with, are not well equipped to help their clients draw down on their assets, particularly in a tax efficient manner. I am always open to new ideas and to expanding my own knowledge base, which ultimately benefits my clients!

It seems likely there is a significant component of personal circumstance, philosophy and choice involved in the decumulation decision. An optimal plan would need to fit and follow on those personal aspects. So as with a lot of other personal finance questions, it seems like there is no one-size-fits-all formula for generating answers. I like finding new (to me) relevant ideas to take into account though, in my own planning, and would be interested in reading the book with that prospect in mind.

Read his first two books. Awaiting his third as we near retirement at 55 in 3 years.
Our drawdown strategy pretty much matches yours Mark. Daryl Diamond’s book has been my guide so far.
A second opinion is always welcomed from Fred.
Put my name in the hat please.

Has anyone else tried Vettese’s calculator that he presents in this book?
I think there are some serious problems with it, but it might be my limited understanding (it is pretty opaque).
For instance, it doesn’t ask me if I am eligible for CPP (just my spouse), and the summary seems to assume that I am not.

1) I tried to use it but I’m not age 50 yet so I faked the number 🙂
2) The questions about prescribed annuity are odd…
3) Even though I’m only age 50, it asked about RRIFs – which is fine I guess since you can RRIF at any age.
4) It did not explicitly ask about OAS.

Our results are:
“Based on your input, your best-estimate income target (before tax) over the next 12 months is $76,300.
Your safe income target (before tax) over the next 12 months is $56,600.”

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Mark Seed is one of Canada's leading personal finance and investing bloggers. As my own DIY financial advisor we've grown our portfolio to over $500,000 - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement.

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